What you need to know when applying for a mortgage in Spain

Can a foreigner apply for a mortgage in a Spanish bank?

Yes. Any person and company that is able to prove the source and amount of their income can apply for a loan from a Spanish bank. It should be borne in mind that for the purposes of granting loans, banks distinguish between non-residents, that is, persons who have a source of income outside of Spain, and residents whose main source of income is in Spain. Non-residents earning an income in other countries must provide the bank with financial documents translated into Spanish or English.

What is the amount of financing and under what conditions can we apply?

For example, Bank Sabadell offers its clients financing up to 70% of the real estate price or valuation, always taking into account the lower value. In practice, it looks like this: the bank receives information from the customer which property and at what price she or he intends to buy. Usually, at this stage, the client has already signed the reservation document, often also a private contract, and paid a 10% deposit. The bank asks for a copy of this contract and an extract from the land and mortgage register (nota simple). Then the bank arranges an appraiser from a cooperating company. The appraiser values the property and presents the valuation to the bank. The customer also receives a copy of this document. The appraisal fee is on the client's side, it costs between 300 and 700 EUR, depending on the size of the property.

Important information: apart from the minimum 30% own contribution, you should have funds to pay the costs of transactions that the bank does not finance. These transactional costs amount to between 10% and 15% of the transaction value, and include: progressive transfer tax (ITP) for secondary market properties or 10% VAT for purchases on the primary market. In addition, notary fees, registration fees and lawyer's fees.

What documents should I present to the bank when applying for a mortgage in Spain?

To apply for financing, you must submit a set of documents to the bank.

For natural person, it will be:

• A completed application for a mortgage (bank form),
• ID card,
• NIE number of the person applying for the loan,
• Employment contract,
• Tax declaration for the last two years,
• Last 3 payment slips,
• Account statement for the last 6 months,
• Information from Credit Information Bureau,
• Detailed information on existing credit obligations,
• Completed declaration regarding owned assets and liabilities (bank form),
• Apartment rental agreement (if any),
• Information on the accumulated funds that the client intends to spend on the purchase of real estate.

For self-employed people or business owners, these will be the following documents:

• A completed application for a mortgage (bank form),
• ID card,
• NIE number of the person applying for the loan,
• Tax returns for the last 2 years,
• Company tax returns for the last 2 years,
• Personal account statement for the last 6 months,
• Company account statement for the last 6 months,
• Information from Credit Information Bureau,
• Detailed information on existing credit obligations,
• Completed declaration regarding owned assets and liabilities (bank form),
• Apartment rental agreement (if any),
• Information on the accumulated funds that the client intends to spend on the purchase of real estate.

After receiving such a set of documents and the aforementioned documents regarding the property, the bank has between 10 and 14 days to issue a credit decision. Sometimes in this period the bank will ask the customer for some additional documents. This usually happens when the client lacks a few points for the requested amount of financing. If the client has an additional source of income (e.g. from rental) and can prove it, the bank will add the received document to the rest to increase the client's creditworthiness and provide him with the highest possible financing.

The bank's final offer depends on the customer's creditworthiness. Creditworthiness is calculated based on income, liabilities, family and professional situation as well as property status. The bank always considers the property that the client intends to buy.

Credit terms on the example of Banco Sabadell

For customers outside the EURO zone, the bank may offer floating-rate mortgage loans. If you are planning to buy a property financed with a loan, it is worth making a decision now, when loan prices are the lowest in many years.

Mortgage example, standard offer:

• rated mortgage,
• variable interest,
• first year 2.50%,
• next years Euribor + 3.25 points (with a discount we will get Euribor + 2.50 points),
• products that lower the cost of a mortgage include: life insurance, real estate insurance and a Key Account bank account,
• the cost of granting the loan is 1% - 1.5% of the requested amount.

What does signing a loan agreement look like?

In Spain loan agreements are signed at the notary. On the day of signing the notarial deed of real estate purchase, a loan agreement is also signed with an authorized bank employee who appears in the notary's office for this purpose. Sabadell Bank pays all costs related to taking out a mortgage: notary fees, taxes related to the loan agreement and registration.    

How can a foreigner pay for property in Spain? 

We have 3 options here:

• Banker's check (less often a transfer) from your account in Spain;
• Banker's check (less often a transfer) from the account of his representative / attorney, if he hired him;
• Transfer from your account in your country of residence.

The most convenient and most used method of payment is a check drawn from your own account in Spain. For issuing a banker's check, the bank will charge a commission of 0.4% of the amount, with a maximum of € 300 per check.

Opening an account in a Spanish bank is not complicated, and the account will be needed not only when buying the property, but also – or above all – to service it after the purchase. Any utility charges will be settled through a fixed debit from the owner's Spanish account. This solution is convenient and protects both parties, the owner and the media provider. The bank will also collect loan installments from this account. The property owner just needs to top up the account so that it has sufficient funds to cover its liabilities.

We thank Dagmara Korczyk of Banco Sabadell for providing the information used in this article.

Cover photo – Markus Spiske on Unsplash